Sections

ideals
Business Essentials for Professionals



Renault Shares Drop After Withdrawal Of Merger Offer By Fiat Chrysler


06/07/2019


Renault Shares Drop After Withdrawal Of Merger Offer By Fiat Chrysler
The stocks of Renault dropped by 8 per cent after Fiat Chrysler withdrew its earlier proposal of a merger with the French car maker. No decision about the merger was taken on Wednesday by the representative of the French on the board of Renault.
 
In order to convince its Japanese alliance partner Nissan for the merger, Renault had also asked sought more time. 
 
"It has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully," Fiat Chrysler said making the withdrawal announcement.
 
The proposed merger between the two of the major car makers of the world would have resulted in the creation of the third-largest car company in the world with a combined market capitalization of $39 billion.
 
The delay to take a decision by the representatives of the French government in the board of Renault was the second such delay in the week which resulted in Fiat pulling out the offer, according to a report published by Bloomberg.
 
Fiat Chrysler said in the statement that it remained "firmly convinced of the compelling, transformational rationale" of the tie-up.
 
Nissan, the longtime Japanese partner in its three company alliance, had raised doubts and questions about the proposed cost savings and the sharing of technologies which had prompted Renault to seek more time to convince Nissan officials in favor of the merger. It has been decades now that Renault and Nissan has been partnering in an alliance through which the companies engage in bulk-buying of components together and share technology and factory space for production purposes. While Renault has a 43 per cent stake in Nissan, the Japanese car maker has a 15 non-voting right in the French car maker.
 
There were also questions raised by the French government about the merger because it is 15 per cent stake holder of Renault. The French government, in recent weeks, had been demanding assurance about jobs, regulation, factories, a board seat, and a payout to shareholders of Renault, according to media reports. Concerns that the merger of the two car makers would result in job losses were also voiced by labor unions in France
 
There was a drop of 2 per cent in the shares of both Fiat Chrysler and Nissan after the announcement of the withdrawal of the merger offer by Fiat.
 
According to other reports, another major reason for the merger to fall through was over the question of when Nissan would be inducted into the new entity which created strong differences of opinion between the parties. 
 
According to reports quoting sources, it had been agreed between the French government and Nissan that the Japanese car maker would be included in the merged entity at the later stage and for now, Fiat and Renault would merge together. That stance was changed this week by the French government which demanded that support of Nissan would be necessary before any further negotiations on the merger could be moved forward, claimed reports. 
 
(Source:www.marketinsider.com & www.apnews.com)